O'Neill remains bullish about US growth

The American economy has not "fallen off a cliff", the United States Treasury Secretary insisted yesterday as he issued another optimistic forecast for growth in the US.

In a keynote address to the Confederation of British Industry's conference, Paul O'Neill said that GDP growth could hit 4 per cent during 2003. He also tore a strip off Wall Street economists who are predicting another slowdown this year, pointing out that the US economy had confounded their gloomy forecasts in the wake of the 11 Septemberattacks.

He acknowledged there had been a slowdown over the past couple of months – which prompted the Federal Reserve to cut interest rates by half a point – but insisted long-term growth would be sustained by continued improvements in productivity. "I don't have a sense that we have fallen off the cliff," Mr O'Neill said. "In the last 15 days of November there has been a rebuilding of the rate of auto sales that has been a major contribution to our growth rate."

He said he believed third-quarter GDP growth would be revised up today from the current estimate of 3.1 per cent, while the final quarter of the year would depend on the Christmas shopping season.

"Next year we are looking at it maybe starting a little bit slower but then a gathering momentum towards 3.5 per cent and maybe 4 per cent," he said.

He acknowledged there was "some question" over growth during the first half of 2003 but said President George Bush had commissioned a report from his national economic advisers on new measures to sustain the economy.